Sovereign Debt

Key takeaways for Slips readers from a Moody's report, dated today:

First, thanks to all of you who emailed and commented with possible answers as to what the Aurelius strategy in challenging the constitutionality of the Puerto Rican Control Board might be (the subject of Part I).  My favorite answer was the simple: “Create Chaos”.  That was followed by another answer: “Once the sheep start panicking, they become easy pickings for the wolves.”  I’m not sure that I understand either strategy, but tha

While most of the sovereign debt world is focused on Mr. Maduro’s shenanigans in Venezuela, a fascinating litigation is playing out in federal district court in Puerto Rico.  Aurelius, a hedge fund known to many of us because of the role it played in the legendary pari passu litigation against Argentina, is challenging the constitutionality of the Control Board that was put in place to run Puerto Rico’s debt restructuring (and, essentially, key aspects of its fiscal affairs). 

I made a joke in the comments to Mitu’s post about whether the arrest of Citgo executives strengthened the argument for treating Citgo as Venezuela’s alter ego. The joke wasn’t very good; I called Venezuela a “typical activist shareholder.” But Mitu generously took it seriously, asking whether this is the kind of behavior creditors should have expected.